Spiro Paule

The Findex Group advises that the Scheme Implementation Agreement proposed to Crowe Horwath shareholders has received a positive vote and Findex will now move to acquire 100% of Crowe Horwath shares in Australia and New Zealand.

Findex Group CEO Spiro Paule said “Findex will apply to the ASX for the removal of Crowe Horwath from the official list of the ASX with effect from the close of trading on 18th December 2014. “

Findex is paying 50c for each Crowe Horwath share, which places an enterprise value on Crowe Horwath of approximately $200million, and covers all Crowe Horwath businesses in Australia and New Zealand.

The acquisition price implies an equity value for Crowe Horwath of approximately $137 million. The balance represents Crowe Horwath debt for which Findex is assuming responsibility.

Findex intends to maintain and build the Crowe Horwath brand, which is the fifth largest accountancy group in Australasia with 110 offices across Australian and New Zealand.

The addition of the Crowe Horwath business will create an important strategic pillar in the Findex Group, allowing it to strike a more balanced service offering between financial advice and accounting. In addition to its wealth management, lending and risk protection divisions, the group now adds further expertise and market presence in accounting plus significant audit and corporate advice capabilities.

The Findex Group’s business model is based around independence from investment products and non-conflicted advice delivered across the spectrum of financial services. The transaction will mean the Findex Group’s advisory businesses will now have more than $15billion under advice whilst its combined accounting businesses will make it the fifth largest accounting practice in Australasia.

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Amy Early

The Financial Planning Association of Australia (FPA) has announced Amy Early of Crowe Horwath as the winner of the second Gwen Fletcher Memorial Award.

Ms Early, who has been a financial planner for two years, was handed the award for being the highest achieving student in last semester’s CERTIFIED FINANCIAL PLANNER® (CFP®) Certification Program.

Speaking out about her achievement, Ms Early said: “I’m obviously pleased to have finished my studies and it’s a real honour to receive recognition from the FPA. Gwen Fletcher was an outstanding role model and her commitment to assisting financial planners in helping their clients is very inspiring. Receiving this award is a great motivation to constantly aim for the high standards that Gwen set and to make a meaningful contribution to our profession.

“After graduating university with degrees in economics and politics I wasn’t really sure what career path I should take. From my studies and previous work experience I knew that I enjoyed problem solving and helping people. After doing some research, financial planning seemed to be the perfect fit and I haven’t looked back since!”

Mark Rantall, CEO of the Financial Planning Association, congratulated Ms Early on her achievement and said he was pleased that see Gwen’s enduring legacy and commitment being celebrated through this award.

“It is fantastic to see so many bright young planners coming up through the ranks within our profession. It is through planners like Amy – who have a clear commitment to education and higher professional standards – that we will continue to show the true value of quality financial advice.”

According to Ms Early, Gwen Fletcher had a remarkable influence on the development of the financial planning profession in Australia.

“Gwen believed that financial planning was first and foremost about helping people and this shone through in her efforts to constantly improve the profession. The high standard that CFP® professionals hold themselves to today are a testament to her legacy. Gwen left a lasting impact, and perhaps as a result of this, more women than ever are joining the profession.

“As financial planners I think we have a responsibility to commit ourselves to the highest possible professional standards. The CFP® program provides this opportunity through ongoing education and by setting ethical and practice standards. For consumers, the CFP® designation is a valuable tool when engaging a financial planner. Knowing that a planner has undertaken an internationally recognised qualification and that they are part of a professional body that puts clients first can make the decision much easier,” Ms Early said.

Ms Early concluded by saying “I am grateful for the recognition from the FPA for my work and commitment. And I am also appreciative that my employer and mentors Patrick Giddy and Peter Cheadle, really value the CFP® program and have been so supportive throughout my studies. I think it’s really important that all financial planning firms encourage and assist their planners to always aim high in terms of education and professional standards. The CFP® program is challenging, so having support and encouragement from a manager and employer provides a student with that extra motivation to really get the most out of their studies, which in the end, benefits everyone.”

The Gwen Fletcher Memorial Award is presented to the CFP® Certification student who achieves the highest mark in all three required assessments each semester. Winners also receive a $1,000 prize, funded by the FPA.

Pre-admission for next semester’s CFP® program is now open.

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Jeremy McPhail

Accountancy and financial advice specialist, Crowe Horwath, has urged investors to maintain a long-term approach to their investment portfolios and avoid pushing out of defensive assets in pursuit of stronger returns.

Released yesterday, the Crowe Horwath 2014 Ten Best Investment Ideas Half Year Progress Report provides an update on 10 key themes and trends identified at the start of the year by Crowe Horwath’s financial advisors, investment analysts and economists, to help investors make sense of and take advantage of these trends.

Commenting on the report, Crowe Horwath Head of Research Jeremy McPhail said the sustained low interest rate environment was fuelling investors’ appetite for investments offering higher returns.

“It’s important to remember that defensive assets form an invaluable component of any well-balanced investment portfolio and investors should ensure these assets are bedded-down before exploring riskier investments. Investors should also watch out for innovative investments that promote high yields with sustainable growth opportunities and focus on absolute returns rather than relative returns.”

Mr McPhail said that change remained the only constant and investors should remember that planning and securing a comfortable financial future is now more important than ever.

“The one constant for investors is change – social, political, technological and financial, and measures such as those outlined in this year’s Federal Budget, remind us that securing a financial future is more important than ever.

“Over the course of 2014 so far, there has been a high level of geopolitical tension plus domestically we’ve had a national review into the financial system and financial planning scandals that have caused investors to question who they can trust for genuine financial advice. There are a lot of moving parts for investors to digest,” he said.

“It’s certainly making for an interesting investment environment but what we are telling clients is try and distance yourself from that noise and focus on what you can control.”

While investors shouldn’t disregard events such as the current international tensions in various parts of the world, Mr McPhail said it was important to recognise that there are always some negatives and in most cases, investors with a portfolio of quality investments constructed around their long-term goals will be well placed to ride out any volatility.

“There has been plenty of uncertainty over the past 12 months but equity markets have still had another strong year, with returns of over 5% from the 200 largest domestic listed companies and over 8% including income.”

Key opportunities for investors

Nominated as a key theme for investment opportunity in the 2014 report is the acceleration of and rapid response to technology. According to the report, companies investing in infotainment and online shopping are worth investors’ attention, while cloud computing and companies spending on R&D and displaying high levels of productivity and competitiveness are also highlighted as worthy of consideration.

Growth in China and other emerging markets also continue to represent strong opportunities, according to the paper.

“Growth is continuing in China but as we have pointed out for some time now, that growth is changing to become much more focused on consumption. Consumers in China and India are hungry for an authentic brand experience, either at home or abroad and companies tapping into this, such as those seeking to acquire Treasury Wines, partly for their coveted Penfold’s brand and LVMH, which purchased half of Australia’s RM Williams business in 2013, are worth investors’ attention,” said Mr McPhail.

Other investment opportunities identified in this year’s paper include Australia’s travel industry, which is likely to benefit from the changing demographic shift as baby boomers retire and travel more, as well as growing inbound tourism from emerging nations.

“The pick-up in overseas travel by Chinese and Indian nationals is a positive for companies such as Westfield and Sydney Airport, and we continue to favour exposure to these companies as they look to benefit from these trends.”

Crowe Horwath’s top ten ideas for 2014:

1. Focus on your goals, not the Jones’s – Consider your personal goals and needs when setting your investments
2. Change – The only real constant – Baby boomers approaching retirement are changing where consumption is occurring
3. The innovators – Innovation is not just good for consumers but it is producing businesses that are more efficient and producing tangible shareholder value
4. Servicing the demographics – Again! – With a retiring population, aged care facilities demand will outstrip supply
5. The new political regime – With businesses holding back spending due to the 2013 Federal Election, cashed up companies are likely to be looking at mergers and acquisitions in 2014
6. Urbanisation and the growth of the middle class –  Urban population is now greater than rural globally and will lead to different consumer spending patterns
7. Where to invest offshore? – The outlook for global economies is mixed but will mainly be driven by the ongoing recovery in the US market
8. Yield does not equal income – Don’t fall into the ‘yield trap’ but look for quality stocks with both rising dividends and share prices
9. Infrastructure and property – the new annuities – Cash is returning less than inflation so look to mature property and infrastructure for income streams
10. What to do with the banks? – If you own for income, they still provide and attractive yield but they appear fully priced for growth

The Ten Best Investment Ideas provides a roadmap for investors and businesses looking to navigate the political and economic changes which may shape 2014 and beyond. Click here to to obtain a copy of Crowe Horwath’s Ten Best Investment Ideas Half Year Progress Report.

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A new strategic partnership announced yesterday between leading national accounting and financial services firm, Crowe Horwath, and Zurich Financial Services Australia (Zurich) will seek to reduce the high proportion of small businesses without adequate levels of business expenses insurance.

The partnership is designed to improve awareness among the SME sector that business expenses insurance is equally as important as other types of insurance.

Under the arrangement, small business clients will be advised on appropriate risk management strategies, including business expenses insurance, which will allow business operations to continue in the event of temporary injury or illness.

Crowe Horwath Head of Insurance, Maurice Thaung, said many SMEs have not considered the material impact that sickness and injury could have on their business with the Zurich partnership focused on drawing attention to the importance of business expenses insurance.

“We advise more than 200,000 SME clients and while most acknowledge the need for income protection, insuring fixed business expenses specifically is often overlooked.

“Without proper risk management strategies in place, many of these businesses would be forced to cease operating if the business owner were to suddenly fall ill or injure themselves for a prolonged period,” he said.

With the end of the 2013/14 financial year approaching, business expenses insurance is increasingly forming part of client discussions and cited as a key business risk needing to be addressed.

“In the lead up to 30 June, our financial advisers will work with our accountants to provide advice to clients on the most appropriate business continuity and protection strategies. Planning is an important part of any business and business expense cover could be the difference between a business being forced to close or remain running while the owner recovers. The partnership with Zurich will help us put the right strategies in place for our clients,” he said.

According to Zurich’s Head of Sales Strategies and Research – Life Risk, Andy Marshall, Australia already has a huge underinsurance problem and business owners are failing to understand the difference between other types of insurance and business expenses insurance.

“Many people believe that workers compensation, business interruption insurance, or even an income protection policy will cover fixed business expenses if they are unable to work due to sickness or injury. Personal income replacement cover is designed to cover up to 75 per cent of an individual’s taxable income from their business. If they have fixed business expenses and no business expenses cover, then they only have half the protection needed,” he said.

Research shows only 3.3 per cent [1] of new annual premiums are for business expenses cover with 92 per cent [2] of small business owners without expense cover. Business expenses insurance is used to cover fixed business expenses if you are unable to work due to sickness or injury.

 ————–

[1] Source: Plan for Life 2010

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Phil Butterworth

BT Select is pleased to announce Melbourne-based wealth management business First Financial will join BT Select. This follows a competitive review of business service providers undertaken by First Financial.

First Financial was established last year following a 50:50 joint venture with Crowe Horwath, the listed accounting and financial services group. First Financial was formerly the financial services division of Crowe Horwath. It has 60 staff, including 17 financial planners, four lending and finance advisers, and an SMSF administration team. It has approximately $1.1 billion in funds under advice.

BT Select’s managing director Phil Butterworth said this announcement demonstrates BT Select’s continued growth strategy and its ability to attract high quality businesses.

“We are delighted to welcome another outstanding group such as First Financial to BT Select. First Financial shares many of the key attributes of the existing BT Select community – high quality professionals with an appreciation for innovation and a desire to grow its business and service its clients.”

“First Financial’s future growth aspirations are very exciting and we look forward to supporting both their organic growth objectives and potential acquisition opportunities.”

First Financial managing director, Chris White, said BT Select’s capacity to transition practices was a critical factor in its decision to partner with BT Select.

“Back office efficiency is critical for us and BT Select’s approach to embedding experienced staff within our team during this crucial phase is a big plus for us. The strength, insight and innovation of BT Financial Group is also a benefit, and I have confidence that BT Select has the knowledge, experience and ability to help us transition efficiently. Longer term, BT Select’s focus on growth aligns with our strategic plans.”

BT Select helps financial planning practices to grow using innovation, insights and tailored solutions.

BT Select was launched in 2012 and has attracted 67 practices with approximately $7.5 billion funds under advice. It provides a range of business services including licensing solutions, a wide range of market-leading practice solutions and access to a peer support network of like-minded advisers with a culture of innovation and growth. Practices pick and choose the services they need to meet their

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Australian law firms look to increase resilience.

Local law firms have sacrificed growth forecasts to protect partner profitability in response to challenging economic conditions, according to a study of more than 100 law firms by leading national accounting firm, Crowe Horwath, and the Australasian Legal Practice Management Association (ALPMA).

The ALPMA/ Crowe Horwath Financial Performance Benchmarking Study shows that the average profitability of firms has risen slightly to 9.5 per cent (from 9.4 per cent), while growth forecasts have dropped an average of 2 per cent, from an average of 11 per cent last year to 9 per cent this year.

Crowe Horwath Partner – Professional Practice Advisory, Andrew Chen, said across all tiers, economic conditions of the past 12 months have led to a contraction in the size of firms, particularly at a partner level, and growth outlooks for the remainder of 2014 are also being revised.

“Firms have shrunk to fulfil profitability commitments to partners and they’ve had to make some tough decisions accordingly. Paring back growth forecasts is a natural consequence of this,” he said.

Larger firms – those with annual revenue in excess of $20 million – have been slower to reset growth expectations year-on-year, with the business models of smaller firms more conducive to repositioning.

“Smaller firms are more nimble and have therefore adjusted quicker. Also, many of these tend to operate under an incorporated model as opposed to a partnership, so retaining profits is helping with the working capital of those smaller firms.

“Emphasis is being placed on getting more out of less and firms are beginning to see that their efforts are generally paying off,” he said.

According to Mr Chen, firms also needed to critically reassess the financial management and models they operate in. “There has been a lot of change in recent times, so reviewing forecasts in line with the operating model and amending where required will be vital to the sustainability of these firms and the health of the sector more broadly.”

ALPMA President, Tony Bleasdale, said the results showed that firms are effectively managing their cash flow and costs to protect partner profitability in a challenging environment.

“Partner profitability is typically achieved at the expense of revenue growth, and this is not a sustainable approach for firms who want to thrive and prosper in the new legal landscape,” he said.

Mr Bleasdale called on law firms to adjust their focus on strategies that will drive growth.

“Cash is king in this environment, and the study show firms have improved their working capital management which is a good start.”

“Law firm leaders need to continuously challenge the way things are done, to reward innovation and look for new ways to satisfy increasing client demands and strengthen their competitive position”, he said.

Other key findings from the ALPMA/ Crowe Horwath Financial Performance Benchmarking Study include:

• Gross profit margins have declined 2.2 per cent across all firms to an average of 55.3 per cent, representing a 7 per cent decline over four years. Competitive pricing, increasing salary costs and a drop in revenue have contributed to pressure on margins
• Average revenue per partner remained consistent across each tier of firm year-on-year, with the largest recorded change in the $5m – $10m category, where partners generated a revenue increase of $113,000 on the previous year
• Overall, firms have become less financially resilient despite improved working capital management, according to the Crowe Horwath Financial Resilience Index (2.23 this year compared to 3.02 last year). This indicates a reduction in the multiple relating to the revenue generated from available funding resources/ financial investment in firms
• Average lock-up days (the time taken to complete matters, invoice and collect fees from the client) reduced, from 155 days to 147 days in this year’s study. Four years ago, the average was 176 days.

The ALPMA/ Crowe Horwath Financial Performance Benchmarking Study uses Crowe Horwath’s proprietary benchmarking tool, Open Measures, to compare participating Australian law firms. This is the fourth consecutive year the study has been undertaken, with the aim to assess the financial health of legal practices and help firm’s benchmark performance to their peers.

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Crowe Horwath’s top 10 investment tips for 2014.

Accountancy and financial advice specialist, Crowe Horwath, yesterday unveiled its Ten best investment ideas for 2014, helping investors understand how macro trends will impact investment portfolios in the medium to longer term.

The annual paper distils the views of Crowe Horwath’s financial advisors, investment analysts and economists, into 10 themes that make sense of the world and outline its investment philosophy to take advantage of these trends.

Jeremy McPhail, Head of Research of Crowe Horwath said with change being the only constant and innovation causing rapid boom and busts of industries, investors should be making more active investments for their portfolios.

“We have seen companies like Nokia, a mobile phone giant dwindle to only three percent of the global smartphone market by failing to renew their presence in an ever changing space. Companies which invest time and resources into reinventing themselves and their products or services are the foundation for any well performing portfolio,” Mr McPhail said.

Companies investing in research and development and embracing technology to increase market share –  like blood biotherapy company CSL – will be worthy of investors’ attention according to one idea.

Other investments identified in this year’s paper include Australia’s travel industry which is likely to benefit from the changing demographic shift as baby boomers retire and look to travel. Also, as emerging nations such as China and India’s middle classes develop, the number of people travelling will increase; Australia is seen as a desirable destination.

“To take advantage of this, over the medium to long term, we are increasing clients’ exposure to major airport infrastructure assets such as Sydney Airport which is forecasting consistently increasing passenger numbers, providing good room for capital growth as well as steady and sustainable income streams,” he said.

In a historically low interest rate environment, investors looking for sustainable income are being forced to move away from the safety of term deposits and cash into riskier investments. Quality property and infrastructure assets can provide a viable alternative for this in a portfolio.

“Tony Abbott has made much of the fact that he wishes to be known as the infrastructure Prime Minister, leaving behind a legacy of long life, productive assets that will continue to provide economic growth for Australia. While we expect an increase in development of new assets, we favour exposure to more mature and established infrastructure through companies like APA Group,” said Mr McPhail.

Crowe Horwath’s top ten ideas for 2014:

1. Focus on your goals, not the Jones’s – Consider your personal goals and needs when setting your investments
2. Change – The only real constant – Baby boomers approaching retirement are changing where consumption is occurring
3. The innovators – Innovation is not just good for consumers but it is producing businesses that are more efficient and producing tangible shareholder value
4. Servicing the demographics – Again! – With a retiring population, aged care facilities demand will outstrip supply
5. The new political regime – Withbusinesses holding back spending due to the 2013 Federal Election, cashed up companies are likely to be looking at mergers and acquisitions in 2014
6. Urbanisation and the growth of the middle class –  Urban population is now greater than rural globally and will lead to different consumer spending patterns
7. Where to invest offshore? – The outlook for global economies is mixed but will mainly be driven by the ongoing recovery in the US market
8. Yield does not equal income – Don’t fall into the ‘yield trap’ but look for quality stocks with both rising dividends and share prices
9. Infrastructure and property – the new annuities – Cash is returning less than inflation so look to mature property and infrastructure for income streams
10. What to do with the banks? – If you own for income, they still provide and attractive yield but they appear fully priced for growth

The Ten Best Investment Ideas provides a roadmap for investors and businesses looking to navigate the political and economic changes which may shape 2014.

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Retirement back on the agenda for the over 55s: Crowe Horwath

Retirement is back on the agenda for many Australians over the age of 55 according to Australia’s leading SMSF adviser, Crowe Horwath.

Susie Salmon, Head of Superannuation & SMSF for Crowe Horwath said we are having more discussions with clients about retirement strategies than since the global financial crisis (GFC). Clients aged over 55 are again ready to engage with advisers, plan and seek advice on retirement strategies.

“This is markedly different to the last five years where most conversations had been focussed on capital preservation,” Ms Salmon said.

“The last few years have been difficult for SMSF trustees, concentrating on rebuilding the capital base of their funds. This focus on re-accumulating funds lost during the GFC has led to many trustees not having the time to properly plan their portfolios for retirement,” she said.

Crowe Horwath has just completed a series of events throughout Australia with further events scheduled for February 2014. Titled Savvy Super Strategies, over 8,000 clients were invited nationally to discuss the importance of planning for retirement.

“The events aimed to arm clients with the knowledge to ensure they have the most effective solutions in place for retirement including tax planning, balancing member funds and estate planning,” said Ms Salmon.

“The strategies discussed ranged from as simple as consolidating superannuation accounts to more complex strategies around reducing the taxable component of retirement income streams. It is encouraging to see the high levels of engagement of clients attending, especially those looking to retire in the next five years.”

Crowe Horwath said trustees need to constantly review their retirement positions, no matter how young or old to track against future goals, even after you have retired.

It has a series of events planned in 2014 looking at a range of topics including Gen X/Gen Y, Property Structures, Tax Planning, Federal Government Budget Review, Pension Planning & Estate Planning all aimed at educating clients on aspects of their superannuation they need to consider.

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Federal Government should finalise reform to taxation of trusts: Crowe Horwath.

The Federal Government should move to finalise reform to laws governing the taxation of trusts, with interim legislation passed by the previous government hampering the small business sector, according to leading Australian accounting firm, Crowe Horwath.

Five weeks ago the government stated that it would review 92 announced but unlegislated tax and superannuation measures. Reform to the taxation of trusts – started by the previous government but which remained incomplete by the time of the September 7 election – was not on this list. This is despite trust tax reform being one of the most important legislative reform issues for small business.

Crowe Horwath National Tax Director, Tristan Webb, said that the government has stated it is committed to helping small business and therefore should put trust tax reform as a top order priority.  Interim legislation handed down by the previous government in response to the High Court decision in the Bamford case of 2010 was “only ever intended to be a stop gap.”

“We are surprised that the government has indicated that it will move on 92 announced but unlegislated measures but has left reform of the taxation of trusts out.

“Our 16,000 trust clients rightfully expect certainty in their business, farm and investment dealings.  The government should act or at least indicate the direction that they want to move so that our clients can forget about tax and get on with business,” he said.

Two years since the legislation came into effect clear deficiencies have emerged with this legislation.  The Australian Tax Office is currently refusing to finalise a key public ruling on the basis that there are several competing views that relate to key aspects of the legislation, each of which may be correct at law.

The taxation of trusts has been a contentious issue for respective governments. The Howard government originally supported taxing trusts as companies but moved away from this proposal. The Rudd-Gillard government favoured maintaining the status quo post Bamford but legislation purporting to do that has come up short.

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The appointment of Andrew Macpherson represents a new direction for the firm. Andrew joins Crowe Horwath’s Sydney practice with around 30 years experience in financial and management consulting. Andrew was previously a Regional Managing Director for Accenture. 

John Lombard, Group CEO said “the appointment of Andrew is part of the firm’s new strategic direction. Andrew brings a wealth of experience across the financial services, technology, and telecommunications sectors”. 

“Andrew’s appointment is part of our vision to build our bank of expertise in the business advisory area supporting small to medium enterprises and high net worth individuals”, said John. 

Since joining the firm, Andrew has initiated a strategic review which identified a number of growth opportunities for the firm. 

“Working closely with our Principals and clients, it became apparent that we needed to change our business to continue to deliver value to our clients in a volatile market. Crowe Horwath is regarded as the market leader in the mid-tier accounting space and I wanted to ensure we maintain this position by focusing on servicing our client’s needs”, said Andrew. 

“We have re-structured our business around three key segments which will each be led by a senior Principal. We have also introduced new service delivery models that are tailored to meet our client’s requirements”, said Andrew. 

To support their growth strategy, Crowe Horwath’s Sydney practice is actively recruiting and over the past year has recruited 12 new Principals.

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